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Vehicle Financing - US - May 2017

"New car sales are slowing, driving competition in lending. While interest rates remain the most important consideration for borrowers, lenders – regardless of whether they are financial institutions, dealers, or third parties – have to find ways to differentiate themselves outside of rates. Customer service and convenience are also important, and lenders, dealers, and manufacturers are working to streamline the shopping, buying, and financing processes and make it possible for customers to do everything online if they want to."

Robyn Kaiserman, Senior Financial Services Analyst

This report looks at the following areas:

  • Millennials are more likely to use the most expensive forms of financing
  • Fewer are looking to loans for future purchases

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • The issues
          • Millennials are more likely to use the most expensive forms of financing
            • Figure 1: Source of financing, by generation, March 2017
          • Fewer are looking to loans for future purchases
            • Figure 2: Payment option, by timing of vehicle purchase, March 2017
          • The opportunities
            • Build relationships with existing customers to increase satisfaction
              • Figure 3: Attitudes toward loans and lenders, by generation, March 2017
              • Figure 4: Ally Auto email, 2016
            • Interest rates are rising
              • Figure 5: Most important loan/lender benefits, March 2017
            • One-stop shopping for car and loan
              • Figure 6: Attitudes toward loans and lending, by generation, March 2017
            • What it means
            • The Market – What You Need to Know

              • Number of auto loans explodes
                • Auto debt climbs higher
                  • Auto loan delinquency rates are rising
                    • Originations remain strong
                      • New car sales are down
                        • Interest rates
                          • Gas prices
                          • Market Size

                            • Number of auto loans explodes
                              • Figure 7: Number of auto loans, Q4 2011-Q4 2016
                            • Auto debt climbs higher
                              • Figure 8: Total and auto debt, Q4 2011-Q4 2016
                            • Higher delinquency rates are a potential warning
                              • Figure 9: Percentage of loan balances 90+ days delinquent, Q4 2011-Q4 2016
                            • 30+ day delinquency balances are higher
                              • Figure 10: New delinquent auto loan balances, Q4 2011-Q 4 2016
                            • Originations remain strong
                              • Figure 11: Auto loan originations by credit score, Q4 2011- Q4 2016
                          • Market Factors

                            • New car sales are down
                              • Figure 12: Total US unit sales of new and used cars and light trucks, 2011-16
                            • Interest rates
                              • Gas prices
                                • Figure 13: US gasoline and diesel retail prices, January 2007-January 2017
                              • Longer-term loans are more popular
                                • Figure 14: Preference for long-term loan, by gender and age, March 2017
                            • Market Breakdown

                              • Trends in sources of financing for new and used vehicles
                                • Figure 15: Market share of new financing, Q4 2015-Q4 2016
                                • Figure 16: Market share of used financing, Q4 2015- Q4 2016
                            • Key Players – What You Need to Know

                              • One-stop shopping and lending online
                                • More ride sharing may lead to increased car sales
                                  • Delinquencies may increase with higher interest rates
                                    • Lack of trust in dealers is hurting lending efforts
                                      • Ford is first manufacturer to combine online sales and lending
                                        • Use of alternative data in determining creditworthiness
                                        • What’s Working?

                                          • One-stop shopping and lending online
                                            • Carvana and Vroom.com
                                              • Walmart
                                                • Capital One
                                                  • Figure 17: Capital One Auto Navigator statement stuffer, 2017
                                                • Growth in car sharing could boost car sales
                                                • What’s Struggling?

                                                  • Delinquencies may increase with higher interest rates
                                                    • Lack of trust in dealerships may be hurting their lending efforts
                                                    • What’s Next?

                                                      • Ford partners with AutoFi to eliminate trips to the dealer
                                                        • Use of alternative data in determining creditworthiness
                                                          • Clearlane from Ally Bank
                                                          • The Consumer – What You Need to Know

                                                            • Most are planning to buy a car relatively soon
                                                              • Near-term buyers more likely to be Hispanic
                                                                • New, not used, are most popular for next car purchase
                                                                  • Loans are most popular payment option – but demand is decreasing
                                                                    • Most buyers know how they will finance
                                                                      • Interest rate is most important
                                                                        • Lower-income households seek protection against financial hardship
                                                                          • More would pay more upfront to get a lower rate
                                                                            • Banks have advantage over dealerships
                                                                              • Millennials most likely to prefer online loan shopping
                                                                                • Young borrowers need guidance
                                                                                • Profile of Car Buyers

                                                                                  • Most are planning to buy a car within the next three years
                                                                                    • Figure 18: Car buying plans, by time to purchase, March 2017
                                                                                  • Men are more likely to buy
                                                                                    • Figure 19: Car buying plans, by gender, March 2017
                                                                                    • Figure 20: Chevrolet mobile ad, 2017
                                                                                  • Near-term buyers more likely to be Hispanic
                                                                                    • Figure 21: Car purchase plans, by Hispanic origin, March 2017
                                                                                    • Figure 22: Toyota print ad, 2017
                                                                                  • Parents will be in the vehicle market shortly
                                                                                    • Figure 23: Car purchase plans, by parental status, March 2017
                                                                                  • Most buyers plan to trade in a car
                                                                                    • Figure 24: Trade-in plans, March 2017
                                                                                  • New, not used, are most popular for next car purchase
                                                                                    • Figure 25: Type of vehicle to be purchased next, March 2017
                                                                                • Most Likely Payment Method

                                                                                  • Loans are most popular payment option
                                                                                    • Figure 26: Most likely payment method, last vehicle purchased and next vehicle purchased, March 2017
                                                                                  • More Hispanics are planning to borrow
                                                                                    • Figure 27: Most likely payment method, last vehicle purchased and next vehicle purchased, by Hispanic origin, March 2017
                                                                                  • Half of Gen X plans to get a vehicle loan
                                                                                    • Figure 28: Most likely payment method for next vehicle purchased, by generation, March 2017
                                                                                  • CPO buyers are most likely to take a loan
                                                                                    • Figure 29: Most likely payment method for next vehicle purchased, by type of vehicle, March 2017
                                                                                • Source of Financing

                                                                                  • Most buyers know how they will finance
                                                                                    • Figure 30: Source of financing, March 2017
                                                                                  • Millennials are more likely to use the most expensive forms of financing
                                                                                    • Figure 31: Source of financing, by generation, March 2017
                                                                                • Most Important Loan/Lender Benefits

                                                                                  • Interest rate is most important
                                                                                    • Figure 32: Important loan/lender benefits, March 2017
                                                                                  • Hispanics want low monthly payments
                                                                                    • Figure 33: Important loan/lender benefits, by Hispanic origin, March 2017
                                                                                  • Lower-income households seek protection against financial hardship
                                                                                    • Figure 34: Important loan/lender benefits, by household income, March 2017
                                                                                • Loan Behavior

                                                                                  • More would pay more upfront to get a lower rate
                                                                                    • Figure 35: Loan behavior, by generation, March 2017
                                                                                  • Blacks are more concerned about financing upfront
                                                                                    • Figure 36: Loan behavior, by race, March 2017
                                                                                  • Vehicle buying services appeal to women
                                                                                    • Figure 37: Preference for vehicle buying service, by gender and age, March 2017
                                                                                    • Figure 38: USAA car loan email
                                                                                  • Banks have advantage over dealerships
                                                                                    • Figure 39: Loan behavior, by need to finance, March 2017
                                                                                • Attitudes toward Loans and Lending

                                                                                  • Millennials most likely to prefer online loan shopping
                                                                                    • Figure 40: Preference for online loan shopping, by generation, March 2017
                                                                                    • Figure 41: Pacific Marine Credit Union auto loan direct mail postcard, 2017
                                                                                  • Young borrowers need guidance
                                                                                    • Figure 42: Attitudes toward loans and lending, by gender and age, March 2017
                                                                                • CHAID Analysis – The Financing Process

                                                                                  • Young women find financing process confusing
                                                                                    • Figure 43: Attitudes toward loans and lending – CHAID – Tree output, March 2017
                                                                                    • Figure 44: Attitudes toward loans and lending – CHAID – Table output, March 2017
                                                                                • TURF Analysis

                                                                                  • Methodology
                                                                                    • Interest rates are the most important feature
                                                                                      • Figure 45: TURF analysis – Lender benefits, March 2017
                                                                                  • Appendix – CHAID Analysis Methodology

                                                                                    • Methodology
                                                                                      • Figure 46: Attitudes toward loans and lending – CHAID – Table output, March 2017
                                                                                  • Appendix – Data Sources and Abbreviations

                                                                                    • Data sources
                                                                                      • Sales data
                                                                                        • Fan chart forecast
                                                                                          • Consumer survey data
                                                                                            • Direct marketing creative
                                                                                              • Abbreviations
                                                                                              • Appendix – Consumer

                                                                                                • Have auto loan
                                                                                                  • Figure 47: Have auto loan, by gender, Oct. 26, 2015-Nov. 30, 2016
                                                                                                  • Figure 48: Have auto loan, by generation, Oct. 26, 2015-Nov. 30, 2016
                                                                                                  • Figure 49: Have auto loan, by household income, Oct. 26, 2015-Nov. 30, 2016
                                                                                                  • Figure 50: Have auto loan, by Hispanic origin/race, Oct. 26, 2015-Nov. 30, 2016
                                                                                                • Auto purchase methods
                                                                                                  • Figure 51: How purchased most recently acquired auto, by gender, Oct. 26, 2015-Nov. 30, 2016
                                                                                                  • Figure 52: How purchased most recently acquired auto, by generation, Oct. 26, 2015-Nov. 30, 2016
                                                                                                  • Figure 53: How purchased most recently acquired auto, by household income, Oct. 26, 2015-Nov. 30, 2016
                                                                                                  • Figure 54: How purchased most recently acquired auto, by Hispanic origin/race, Oct. 26, 2015-Nov. 30, 2016
                                                                                                • Length of loan
                                                                                                  • Figure 55: Length of loan for households’ most recently purchased or leased car, pickup truck, sport utility vehicle or van, February 2014-November 2016
                                                                                              • Appendix – Market

                                                                                                  • Figure 56: Fan chart forecast for total new light car, new light truck, and used car sales, 2011-21

                                                                                              Companies Covered

                                                                                              To learn more about the companies covered in this report please contact us.

                                                                                              Vehicle Financing - US - May 2017

                                                                                              US $3,995.00 (Excl.Tax)